Oil rigs work on rigs at Gaoyu Lake in Gaoyou in east China’s Jiangsu Province on Friday, September 17, 2021.
Barcroft Media | Getty Images
OPEC and non-OPEC producers, the influential group known as OPEC+, are due to meet on Thursday to decide on the next stage of production policy.
The Energy Alliance will hold a video conference to determine whether to stick with its plan to release more oil to the market or to restrict supply amid Concerns about the Omicron Covid-19 variant.
Other issues on Table A include The release of strategic reserves led by the United States of the countries importing crude oil and Iran’s possible return to the oil market.
Energy Analysts widely expect OPEC+ is moving forward with its current plan to increase monthly production by 400,000 barrels per day. However, some have questioned whether the group might be inclined to pause to assess the market after a period of increased price volatility.
“We think OPEC+ is likely to maintain this momentum in additional oil launches,” Alex Booth, head of research at Kpler, told CNBC’s “Squawk Box Europe” on Thursday.
“Let’s not forget, we are talking about additional oil in January, the December decision has already been taken.”
Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud speaks via video link during a virtual emergency meeting of OPEC and non-OPEC countries, following the outbreak of the coronavirus disease (COVID-19), in Riyadh, Saudi Arabia on April 9, 2020.
Saudi Press Agency | Reuters
Oil prices fell slightly ahead of the meeting, erasing gains earlier in the session.
Brent crude futures have fallen by more than $10 since last Thursday at The emergence of the variable omicron covid It became widely known. The World Health Organization said it will take weeks to understand how the variable could affect diagnoses, treatments and vaccines.
OPEC+ has an agreement to add 400,000 barrels per month to global supply as it gradually reverses last year’s record supply cuts of about 10 million barrels per day.
OPEC Saudi Arabia, leader of the Organization of the Petroleum Exporting Countries (OPEC) shown The group is likely to maintain this production policy, while Russia, a non-OPEC member, said earlier this week that there would be no need to take urgent action in the oil market.
The OPEC+ meeting comes after a period of escalating tension over high oil prices between the United States and its Gulf allies, most notably Saudi Arabia.
US President Joe Biden announced on November 23 the coordinated release of oil between the US, India, China, Japan, South Korea and the UK to help cool the market.
Under the plan, the United States will release 50 million barrels from the Strategic Petroleum Reserve. Of this total, 32 million barrels will be exchanged over the next several months, while 18 million barrels will be an acceleration of the previously authorized sale.
This move came after OPEC + Frequently ignored US pressure to increase the supply of crude oil to impede higher fuel prices.
Kepler Booth said the decision to increase oil production next month would help OPEC+ win over countries like China and India, and “certainly not hurt the relationship with the United States.”
There is pressure from within the Energy Alliance to maintain production increases, too. “As we know, the UAE is always keen to continue maximizing the return on the investments they have made so far [and] Booth said Russia is keen to continue producing more oil as well.
Global X research analyst Rohan Reddy told CNBC’s “Street Signs Europe” on Thursday that the most likely outcome from Thursday’s meeting was a decision to maintain production policy.
“I think the delta formula was a very good guide for how to see things vibrate here,” he added. “So if Omicron and other types of Covid-19 spreads have an effect, you could see prices go down in that range around $65 for WTI or even go down to the $50 range if it gets a lot worse.”
“But I think the most likely outcome is that this appears to be under control,” Reddy added. “The vaccination programs are being rolled out fairly effectively, so you can see prices move up to $75 [to] $80 range [the first quarter]. And I think a real economic recovery is likely to happen after that.”